Describe Project Value Using a Business Case
It can be hard to compare and prioritize the projects in your portfolio because there are many different types of projects. Some projects might increase revenue, some might decrease costs and some might help build internal capability. All of them have some benefit but it may not be easy to know which ones are the most valuable and which ones are the most aligned to your goals and strategies.
The way that you compare projects is through a common Business Case. The Business Case describes the reasons and the justification for the project. It also contains high-level information on the project, including estimated costs, risks, deliverables, assumptions, and the expected business benefits and value. The sponsor is responsible for the Business Case.
Business Cases should contain the following information:
- Description of the project. This is a description of what is being proposed. Be sure that it provides enough information so that others can understand the work that is being proposed.
- Assumptions. List the circumstances or events that must occur for the project to be successful. Assumptions are the things that are considered to be true even though they are not 100% facts. There is some uncertainty, but the Business Case “assumes” certain things to be true for the purpose of planning and definition.
- Risks. List the circumstances or events that would be a major impediment to the success of the project. Risks have a probability of occurring, but they are not guaranteed to occur. Risks generally are seen as bad things that have a detrimental impact on the project.
- Financial model. Your organization must create the common financial model for all projects (ROI, EVA, etc.). This is extremely important if you are going to compare projects on an apples-to-apples basis.
- Estimated business benefit. You must try to determine tangible and intangible benefits in terms of your common financial model. Some business benefit may be indirect, but the benefits should be as tangible as possible to compare favorable with other projects.
- Estimated cost. Provide as accurate estimate of the cost as possible. Your department may set a standard for the level of accuracy required. For the Business Case, you might look for estimated cost to be within 35%-50%.
- Alignment. Validate the alignment by specifying how this work contributes to your organization's goals and strategies. Your organization should have a pre-defined model and common rating scheme for alignment so that you can compare projects effectively.
- Is the work required? Specify whether you feel this work is essential. Some work may be required for legal or regulatory reasons, even if it is not aligned and does not have obvious business benefit.
- Urgency. Describe the required timing of the project. Some projects need to start at a certain time. Some projects must be completed by a certain time. Other projects can be executed at any time throughout the coming year.
- Consequence of not performing this year. Describe what the consequences are of not performing the work. In many cases, this is just as important to know as the business benefit and alignment.